Savings Plan Would Assist South Carolina Workforce to Plan for Retirement
Wednesday, February 28th, 2018
The retirement savings rate in the United States is dismal. The average household has only $2,500 saved for retirement and those nearing retirement only have approximately $14,500 in savings.
Closer to home, South Carolina ranks 50th worst in 401k savings. Unfortunately, there are 830,000 employees in the South Carolina workforce who have no way to save for retirement through their employer.
One of the best ways to help people save is through the workplace. Research shows that individuals are 15 times more likely to save if their employer offers a payroll deduction for saving versus finding an IRA on their own.
In 2017, AARP South Carolina established a “Work and Save” Task Force to explore this issue. The Task Force supports the creation of a workforce retirement savings program for South Carolina, called the Palmetto Retirement Savings Plan. The plan would be independently co-managed by a Cooperative Board of Directors and the state.
“The Palmetto Retirement Savings Plan provides a pathway to the more than 830,000 members of the South Carolina workforce who currently do not have a way to save for retirement at work,” said Teresa Arnold, AARP South Carolina State Director. “This savings plan would go a long way toward preparing South Carolinians for their retirement years.”
It would be easy for employers and their employees to save through the Palmetto Retirement Savings Plan. Here are some simple scenarios that explain the program.
For employers:
-
Employers who do not currently offer a retirement plan could easily choose to participate in a turnkey, 401k type retirement savings program for themselves and their employees.
-
Would only need to set up a payroll deduction for the employee.
-
There is no requirement to match employee contributions but could choose to do so.
For employees:
-
Employees would automatically be enrolled but at any time opt out as a participant. An employee would decide how much to contribute per pay period via payroll deduction allowing them to be in complete control of their Investment account.
-
If an employee changes jobs, the plan would be portable so employees could take their Palmetto Retirement Savings account with them to their new job.
-
Employee contributions would be deducted from pre-tax earnings.
-
A professional financial institution would manage each account.
Currently, a financial feasibility study is underway to determine start-up and overhead costs, when and how the program would become self-sustaining and any estimated administrative cost. This study will be completed May 2018.